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Post-Brexit Britain to rely on emerging markets?

BAAR, Switzerland: July 19, 2017. As Britain's Conservative government acknowledges the one-time cost of leaving the EU could be £66 billion, Agility Logistics expects the country "will try to spark its economy through trade with emerging markets" after March 2019.

In a report produced in conjunction with analyst Transport Intelligence, Agility says the more difficult the divorce, the more likely Britain will seek quick trade deals with Malaysia, Sri Lanka, Gulf Cooperation Council countries and Brazil.

China and India, it notes, "have the muscle to press the UK for significant concessions and [deals] are unlikely to be hashed out rapidly."

Agility emerging marketsHowever with the EU accounting for 47 percent of UK goods exports in 2016, new trade deals with emerging markets may be constrained by the EU, as the report asks: "Would the UK sweep away barriers to permit cheap North African citrus to the UK if the EU, which heavily protects its Mediterranean producers, retaliates with duties on UK manufactured goods?"

Essa Al-Saleh, CEO of Agility Global Integrated Logistics commented: "Apart from the political hurdles, the UK's desire for 'frictionless' trade with the EU faces complex technical obstacles – what to do about tariff-rate quotas, rules of origin, product standards and import duties. Anything that alters existing UK-EU arrangements probably means delays and added cost to the movement of goods."

The report also notes an already-weakened Sterling will make imports from both the EU and emerging markets more expensive; lead to potential trade disputes over tariffs on agricultural goods and quota arrangements; damage the UK's role as a gateway to the EU for emerging markets; and make exports more costly due to Rules of Origin checks.

Even a Customs union between the UK and the EU would not guarantee the government's hoped-for frictionless trade in goods, according to Agility. "Turkey - which has a Customs union with the EU but is not in the Single Market - faces documentation checks and product sample tests where it does not follow EU rules for the production, labeling, movement and storage of certain goods.

"So the UK needs to establish an appropriate regulatory agreement with the EU or face border checks," the report points out.

In addition to the Brexit impact, Agility notes India's decision to replace more than a dozen state and federal levies with a single Goods and Services Tax from July 01 has led the country's "notoriously inefficient logistics sector" to consolidate warehousing, revamp road freight strategies, and invest in system upgrades to improve the efficiency of their supply chains.

The result could cut logistics costs in India's formal logistics sector by 20 percent, encourage infrastructure investment and further boost the country's surging economy, the report concludes.

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